Trebor Sportswear Co., Inc. v. The Ltd. Stores, Inc.

• Decision Date: 12 January 1989
• Docket Number: No. 1083,D,1083
• Citation: 865 F.2d 506
• Parties: 7 UCC Rep.Serv.2d 975, 27 Fed. R. Evid. Serv. 757 TREBOR SPORTSWEAR CO., INC. and Rotano Sportswear Co., Inc., Plaintiffs- Appellants, v. THE LIMITED STORES, INC., Defendant-Appellee. ocket 88-7106.
• Court: U.S. Court of Appeals — Second Circuit

Page 506

865 F.2d 506

7 UCC Rep.Serv.2d 975, 27 Fed. R. Evid. Serv. 757

TREBOR SPORTSWEAR CO., INC. and Rotano Sportswear Co., Inc. Plaintiffs- Appellants, v. THE LIMITED STORES, INC., Defendant-Appellee.

No. 1083, Docket 88-7106.

United States Court of Appeals Second Circuit.

Argued May 4, 1988.

Decided Jan. 12, 1989.

Harlan M. Lazarus, New York City (Lester A. Lazarus, P.C., New York City, of counsel), forplaintiffs-appellants.

Russell A. Kelm, Columbus, Ohio (John A. Gleason, Schwartz, Kelm, Warren & Rubenstein, Columbus, Ohio, of counsel), for defendant-appellee.

Before OAKES, KEARSE, and PIERCE, Circuit Judges.

PIERCE, Circuit Judge:

Appellants Trebor Sportswear Co., Inc. ("Trebor") and Rotano Sportswear Co., Inc. ("Rotano") appeal from a judgment entered January 26, 1988 in the United States District Court for the Southern District of New York, Charles L. Brieant, Chief Judge, which granted the motion of appellee The Limited Stores, Inc. ("The Limited") for summary judgment and dismissed appellants' claims for damages for breach of contract, and which granted appellee's motion for summary judgment on its counterclaims for payment for goods delivered to appellants. The district court granted summary judgment and dismissed the amended complaint on the grounds, first, that the evidence of an agreement proffered by appellants Trebor and Rotano was insufficient to establish an enforceable contract under the statute of frauds, N.Y.U.C.C. Sec. 2-201, and, second, that the evidence was inadmissible under Federal Rule of Evidence 408. For the reasons stated below, we affirm.

BACKGROUND

The Limited is a distributor and vendor of women's apparel, incorporated in Delaware. Apparel that firms such as The Limited seek to dispose of in the secondary market is referred to in the industry as "sell-off" merchandise. Trebor and Rotano bought and distributed sell-off merchandise. In late 1985 or early 1986 Trebor entered into the first of several agreements to purchase women's apparel from The Limited. Prior to the delivery of most, if not all, shipments, The Limited sent Trebor an invoice expressly stating that payment was "due upon receipt." Nevertheless, Trebor generally did not pay for the goods upon receipt of the invoice, nor, in fact, did Trebor usually pay for the goods upon delivery of the merchandise itself, which typically arrived thirty days after receipt of the invoice. In some instances, payment followed receipt of the invoice by more than sixty days.

Beginning in the spring of 1987, Rotano, a New York corporation affiliated with Trebor, agreed to purchase women's apparel from Limited Express, a division of The Limited. Appellants claim that Rotano, like Trebor, customarily paid its bills at some point after receipt of its merchandise.

Appellants allege that in February 1987 The Limited offered Trebor and Rotano, and that they accepted, a "right of first refusal" with respect to approximately $10,000,000 worth of women's apparel. It appears, however, that this alleged agreement was never reduced to a contemporaneous writing.

According to The Limited, by the end of June 1987, Trebor and Rotano were delinquent on their outstanding invoices. Trebor and Rotano claim that on July 7, 1987, The Limited nevertheless issued to Trebor four additional invoices totaling $4,303,638.75, and that two days later, on July 9, The Limited issued to Rotano seven additional invoices totaling $1,931,487. The merchandise had apparently not yet been delivered when on July 17, 1987, representatives of The Limited met with representatives of Trebor and Rotano and informed them that no further merchandise would be forthcoming from The Limited until payment was received for the merchandise already delivered, and that any further merchandise they purchased would have to be paid for upon receipt of the goods. Trebor and Rotano on the same day agreed to pay The Limited $2,002,923; approximately $1.3 million of that July 17 payment was for earlier amounts owed The Limited, and the remaining $700,000 was paid "on account," to be credited towards the merchandise from the July invoices (all of which apparently was delivered to Trebor and Rotano). Trebor subsequently paid a further $500,000 "on account" while this litigation was pending. Thus, of the merchandise delivered on the July invoices, which cost approximately $6.2 million, Trebor and Rotano owed approximately $5 million, plus interest, at the time of the district court's judgment.

The Limited's July 17 demand for payment had almost immediate repercussions. Four months earlier, Rotano had received goods worth $423,102.75 from Limited Express. Rotano had paid $171,321.50 of that amount by a check to Limited Express dated July 2, 1987, but in the wake of the July 17 meeting with The Limited, Rotano stopped payment on the check on or about July 23, 1987.

Approximately seven days later, William K. Gerber, the vice president and controller of The Limited, sent a cover letter and draft agreement (the "July 30 Documents") to Robert Falus, president of Trebor and Rotano. In relevant part the letter stated:

Enclosed is a draft agreement between our companies that can resolve the current issues and allow us to go forward with our business relationship.

We believe the proposal is fair, and your prompt attention is requested. Please approve the agreement and return one copy to me so that we may move forward.

Robert, we must resolve this issue without further delay. I must emphasize that failure to reach an agreement or at least bargin [sic] in good faith, will leave The Limited with no alternative other than immediate legal action.

The draft agreement read as follows:

AGREEMENT FOR MERCHANDISE SHIPMENT AND PAYMENT BETWEEN THE LIMITED STORES, INC. AND

TREBOR SPORTSWEAR CO., INC.

ROTANO SPORTSWEAR CO., INC.

* The parties agree that it is their mutual desire to continue the business relationship.

* TREBOR and ROTANO have purchased certain merchandise from The Limited Stores, Inc.

* TREBOR has received (subject to final quantity verification) merchandise valued at $4,303,638.75, against which $500,000 has been credited as partial payment. The balance currently outstanding is $3,803,638.75. (See attachment A).

* ROTANO has received (subject to final quantity verification) merchandise valued at $1,931,487.00, against which $200,000 has been credited as partial payment. The balance currently outstanding is $1,731,487.00. (See attachment B).

* The Limited Stores has remaining merchandise not yet shipped to TREBOR and ROTANO in the following approximate quantities and prices:

                TREBOR
                19,000 units Largo pant at $13.00                  $ 247,000
                112,00 [sic] units Striped Oxford Shirt at $9.15  $1,024,800
                ROTANO
                16,000 units Sweatshirt at $14.50                  $ 232,000
                                                                  ----------
                TOTAL                                             $1,503,800
                

PAYMENT AND SHIPMENT TERMS:

* ROTANO/TREBOR will pay 80% of the current outstanding balance (calculated at $4,428,100) by certified check. The certified check will be transmitted to a third party law firm acting as trustee. This third party law firm will be selected by mutual agreement of the counsel of The Limited Stores and TREBOR/ROTANO.

* The trustee will inform The Limited Stores that the certified check has been received. The Limited Stores will immediately initiate shipment of the remaining merchandise to warehouse locations as designated by TREBOR/ROTANO.

* Upon confirmation of the shipment of the merhcandise [sic] the trustee will release the certified check to The Limited Stores for immediate deposit.

* The balance of the outstanding debt ($1,107,025 + $1,503,800) will be payable by certified check 30 days from shipment of the remaining merchandise.

* In addition ROTANO owes The Limited Express $423,102.75. This complete balance will be paid by certified check within 10 days from shipment of the remaining Limited Stores merchandise.

* The Limited Stores will grant to TREBOR/ROTANO a "Right of First Refusal" on future sell-offs of merchandise for an initial time period of one year. This right of first refusal will be defined as offering for bid by TREBOR/ROTANO all sell-off merchandise which The Limited may have interest in disposing of through the secondary market.

* This Agreement embodies all obligations and understandings of the parties on this matter and incorporates all prior negotiations and understandings between the parties.

Trebor and Rotano chose not to accept The Limited's offer and commenced an action in state court on July 31, 1987. The complaint in that action alleged, inter alia, that The Limited had agreed in the spring of 1987 to sell Trebor and Rotano $10 million worth of women's apparel; that The Limited had delivered only $7 million worth of apparel; and that The Limited had unjustifiably failed and refused to deliver the balance. On grounds of diversity, The Limited thereafter removed this case to federal court and asserted counterclaims totaling $3,303,638.75 against Trebor, and $2,154,589.75 against Rotano, for goods which The Limited had delivered to them but for which payment had not been made.

The Limited moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, for summary judgment pursuant to Rule 56. Following a hearing held on January 12, 1988, Chief Judge Brieant granted summary judgment in favor of The Limited in all respects.

In granting summary judgment on The Limited's counterclaims, the district court noted that appellants had not disputed those counterclaims for current liabilities. The court then proceeded to consider Trebor and Rotano's claims and held that they were barred by the statute of frauds because documents on which appellants founded their claims--the July 30 Documents--failed to "describe all of the elements of a relationship [and were] unclear as to duration." Moreover, the court found...